Why ERP Systems Are No Longer Relevant Today?

What is ERP System?

The term “enterprise resource planning” (ERP) refers to a class of software that businesses use to oversee routine operations like accounting, purchasing, project management, risk management, and compliance.

What is the role of the ERP System?

ERP systems enable the exchange of data between numerous business processes and tie them all together. ERP systems eliminate data duplication and provide data integrity with a single source of truth by gathering an organization’s shared transactional data from various sources.

Enterprise resource planning system provides single-system solutions for integrating business processes. These programs enable information sharing, cross-functional cooperation, and user interaction within a single interface. They boost efficiency, productivity, and teamwork.

ERP and digital transformation were synonymous two decades ago, but with the onset of the digital age, they may no longer be the right solution for modern-day business needs. Digital transformation is widely recognized as an essential initiative for organizations in the 21st century, as it allows for increased efficiency and improved customer experience.

However, due to the numerous challenges associated with updating and using ERP software for small businesses in a digital age, many organizations have instead decided to adopt agile methods. By doing so, you’ll be better prepared to face the challenges of the digital age head-on!

This blog highlights the various benefits of adopting agile to an ERP system and the challenges it faces in making this transition.

Industrial age vs. digital age

The Industrial Age is the period from the early 19th century until World War II. Technological advancements such as railways and factories revolutionized how we lived and worked during this time.

Some of the most significant technological advancements during the Industrial age include railways, factories, and electricity. Factories revolutionized how we produce goods and create jobs for millions of people.

Railways allowed for increased trade and transportation, increasing wealth across many industrialized nations. Electricity allowed for long-distance communication, navigation, and other forms of modern technology, which significantly improved our overall lives.

The digital age refers to the period from the early 1990s until today. During this time, tremendous advancements have been made in cloud technology, including advances in information and communication technologies (ICT).

Thanks to these ICT advancements, we can now live our lives more seamlessly and efficiently than ever. Some key ICT advancements during the digital age include connected devices for more seamless integration between people and processes.

Rapid technological change means businesses must constantly update their systems to remain competitive. Growing consumer demand for innovative new products and services means companies must develop unique offerings to maintain customer loyalty.

Every new technology, whether it was electricity in the 17th century, cars in the 18th century, aircraft in the 19th, or the internet in the 1980s, looked terrific to that generation but uninteresting to a new era as they witnessed their share of innovations.

The core of digital transformation

In digital transformation, digital technology is integrated across all business areas, radically changing how it operates and delivers customer experience. A cultural change also requires organizations to challenge the status quo, experiment continuously, and learn from mistakes.

Every industry is going through all sorts of digital transformation, whether a manufacturing company or financial institution. Fundamentally they all looking to automate business processes aiming to achieve less friction, elevate profits, and increase customer experience and productivity.

The center of attraction in this transformation is the users [both internal and external]. Companies might have the best technologies and resources for digital transformation, but it means nothing if the leadership and culture fail to understand what digital means to them.

In the aftermath of the pandemic, many organizations found their businesses collapsing. Meanwhile, the crisis also accelerated the adoption of technology within a variety of industries around the world. As technology has been integrated into traditional business structures, certain trends have emerged that may dictate the future of digital transformation.

The top reasons why digital transformation services took off post-pandemic. 

• Cloud computing
• Automating business processes to enhance customer experience
• Remote and Hybrid working environments
• Acceptance of Artificial Intelligence & Machine Learning
• Implementing policies at every level
• A sudden surge in adopting blockchain, NFT, and Metaverse

Why not opting for ERP is the right move?

Digital transformation is an urgent and necessary process for many organizations. Moving away from traditional modes of operation and toward digital media is one way to achieve this. As a result, businesses need different software tools to support their transformation.

Some of the biggest challenges associated with digital transformation include reengineering costs, changing needs, data management, process automation, and sustainable business growth.

Systems must also evolve from ERP to the new range of market offerings if they are to be successful. Incorporating upmarket technologies like blockchain and AIML into the system is the new wave to look forward to as the business houses today don’t want to settle for less than being No. 1 in the market.

While it’s evident that ERP is no longer a dominant player in the changing business world let’s dive deep into the mentioned factors behind this reality.

1) Change Resistance

Many organizations resist change. They are likely used to working in a way that does not require updating their systems. And, even if the organization wants to adopt new technologies, getting everyone on board with the changes can be difficult. In addition, many businesses may not have a clear vision for what they want their digital transformation process to achieve.

Without a plan and roadmap, it’s straightforward for an organization to lose sight of its objectives and fall short of expectations.

2) Lack of a Dedicated IT department

Many organizations don’t have a dedicated IT department. In other words, they are responsible for all the company’s technology needs. In many cases, this is too much for one person to handle. Additionally, this arrangement often leads to wasted resources and fragmented systems. As a result, businesses would be better off if they hired outside consultants to avail of digital transformation services.

Ultimately, Erp systems no longer play the same role in modern business operations as they did in the past. The shift towards more innovative solutions means companies must explore other options to maintain their competitive edge.

3) Customer Needs Are Ever-Changing

Customers’ needs change all the time. It is because they always look for innovative products and services for their customers. As a result, businesses must constantly evolve their offerings to keep up with customer demand. If you cannot do this, your competitors will likely beat you to the punch.

Innovation in technology and business models has become increasingly crucial for businesses seeking to stay competitive. Without innovation, companies will eventually fall behind their competitors. Organizations that fail to innovate in the marketplace may find themselves irrelevant soon.

4) Lack of Roadmap and Implementation

Deciding what application you’ll need to set up and running, or simply adding the latest and most remarkable technologies to the company, isn’t sufficient to incorporate digital transformation Services. Digital Transformation would not be effective if a Business Roadmap is not aligned with IT.

Creating a comprehensive map of the area is essential before adopting new technology. In addition, the leaders must establish how they propose to accomplish the transformation objectives.

5) Re-engineering cost

ERPs are changed or upgraded based on vendors’ recommendations, which is one of the worst deciding factors. Upgrading or re-engineering the current ERP system incurs a considerable cost as it requires massive efforts and the involvement of people who are originally hired to fulfilling higher output responsibilities.

Reengineering can be as complex as implementing a new ERP software. The scope of improvement is rarely well-defined by the users and the developers; they are unaware of the users’ requirements and technology limitations. Therefore in such a scenario, it barely seems wise to continue investing in an infrastructure that is slowly dying.

Another reason behind reengineering the ERPs is the declining demand for the solution in the market. Since the companies are trying out new flexible and more cost-effective software, there is a lack of skills in the market.

Since most of the ERPs were developed using old technologies, they are now considered to be primitive or outdated technologies. Developers who still work on those technologies are busy acquiring new skills and working on new open-source technologies such as; Python, Php, React, Angular, Blockchain, etc.

6) Efforts

Every company has its area of expertise and caters to a certain market segment through its product or services. Over some time, it starts functioning through a specific hierarchy. ERPs are the threads that bind people together from across various functions.

But when you pull key people from doing what they are highly productive at and put them into sharpening the tools, the whole productivity and income go for a toss.

Similarly, during this significant decision, such as changing or reengineering the ERP comes into the picture, key position holders of the company and their second-in-commands are diverted from the area of their primary responsibilities (revenue generating) to activities related to the improvement of the infrastructure, which is not directly productive.

These highly designated people who are remotely experienced in ERP reengineering are made to make efforts in such endeavors, which acts as a double-edged sword for the company’s business and revenues. All major company functions such as; operations, marketing, and sales unintentionally come to a halt.

Apart from this, since those people are not accustomed to participating in such infrastructural improvement activities, they are less likely to achieve substantial results in the stipulated time. Uncertainty again comes at a very high price.

7) Challenges technology upgradation

ERPs date back to the 1960s, using early programming languages and keeping a standard working style. Over the years, people have become more open to trying out different work practices to keep up with the competition in their respective lines of business.

We live in times of emerging technologies and evolving work cultures and lifestyles, where these changes take place rapidly. And so are the needs.

Looking at the current needs of businesses and the way they operate today, IT companies have moved to more adaptable and agile technologies. They have come up with simple, fast, and integrable solutions.

Sadly there are hardly any ERPs available that can keep up with the rapidly changing work culture and could be integrated with tools of today’s times, such as; Asana, WorkDay, Envision, Zapata, Ariba, SuccessFactors, Slack, Jira, etc., using APIs.

This is why if you ask the top 10 digital transformation companies, you will find them recommending custom-built solutions instead of advocating obsoleting ERP systems.

8) Data migration

The procedures of migrating data from your existing system to a new platform can be somewhat tricky, depending on the nature of your current systems and data. Employees rely on this shared, central database to access critical information when an ERP system goes live.

It’s needless to emphasize the importance of ensuring this database contains accurate data. A few of the challenges that you are most likely to face and are going to hate are as follows:

• Empty fields
• Missing data
• Outdated data
• Duplicate records
• Data in the wrong fields
• Some of the data is no longer associated with your system

9) Data validation post-migration process

Performing data validations before migrating help understand how the data flows to the new system. This is known as pre-migration testing, and it detects if there are any preexisting issues. It is essential to validate whether the data flowed as expected for the end users after the new system has been implemented.

To meet this objective, the team runs smoke tests on all data migration transactions to ensure that nothing is broken, including; field names, field types, minimum and maximum values, length, mandatory fields, and all validations at the field level.

Validation compliance causes unnecessary workload and delays in getting the workforce back in progress. Initially, data was entered into the system according to the business and validation rules in place at a particular organization. Do those standards still match your current goals and best practices, or should they be updated?

Following validation rules blindly without considering their validity could result in transferring data you don’t require or can’t utilize. To do this, your project team must stop what they are doing and carefully check to see if any new data rules need to be changed or created. They should then verify that the ERP database uses the new validations.

Intensive care is required to course-correct, ensuring the data team doesn’t find any critical errors that need to be resolved. Several weeks before your go-live date should be spent fine-tuning the ERP system. Validating and testing data usually takes weeks.

Conclusion

In today’s digital world, ERP systems are no longer relevant. It is because of the challenges they face during digital transformation—the inability to keep up with changing business requirements.

There are simply too many options out there in the marketplace. Suppose you want to define a digital strategy that’s most aligned with your business needs, goals, your priorities, your culture, your risk tolerance, and all that stuff. In that case, you need to consider all your options and look to not only where technology is today but where it’s headed in the future and make sure you find that fit that’s the best aligned with your organizational needs and objectives.

ERP systems can, however, be adapted to agile processes to overcome these challenges. Doing so can reap the many benefits of a successful digital transformation. So, if you’re looking to modernize your business processes, look no further than agile system processes! Read more about the author’s experiences and thoughts on this matter.